Safety net for low income earners

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Singapore's Central Provident Fund (CPF) was launched in 1955 as a simple way to give low-income workers security in their old age.

It has now progressed into a sophisticated, life-long financial plan.

Newlyweds can use part of their fund savings to buy a home, while young professionals can invest theirs in shares. Breadwinners can use funds to pay for their children's tertiary education or for personal or home insurance.

But the fund's primary objective is to provide for old age, and controls are in place to safeguard the money for that purpose.

Unlike many countries where the government pays for most of the social bills, Singapore's social security needs are managed through the following four layers of financial planning.

Individuals save for their future through the CPF scheme.

Families are encouraged to pool resources to care for children and parents, who are considered their responsibility.

Health and welfare needs are met by insurance schemes which cover individuals and benefit their dependents.

There are many charitable organisations which care for the poor and the handicapped. However, as a last resort, the government will provide assistance to the needy.

When the CPF was first established, workers earning under S$500 (about HK$2,725) per month contributed 5 per cent of their wages. This was matched by their employer. It was not compulsory for people earning more than $500 to join the fund, but the $500 yardstick was eventually scrapped and all employees now have to contribute.

Now, 20 per cent of an employee's monthly salary is paid to the CPF and matched by the employer. Last year there were 2.52 million CPF members. Total savings last year amounted to $57.05 billion.